Tech Talk for Monday August 5th 2019

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Pre-opening Comments for Monday August 5th

U.S. equity index futures moved sharply lower this morning. S&P 500 futures were down 44 points in pre-opening trade. Index futures responded to growing tensions between the U.S. and China. China retaliated over the weekend following an increase in tariffs announced by the U.S. on Friday.

Other major world equity indices also moved lower. The Nikkei dropped 367 to 20,720, The Shanghai Composite Index fell 46 points to 2822, The DAX Index lost 189 points to 11,684 and the FTSE plunged 167 points to 7,240.

Gold responded to growing trade war tensions. Gold added $13.50 per ounce to a six year high.

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Target dropped $0.41 to $81.11 despite an upgraded to Buy from Hold by Deutsche Bank

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Berkshire Hathaway (BRK.B $202.67) is expected to open lower after reporting lower than consensus second quarter earnings.

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Dollar Tree dropped $1.90 to $94.97 after Deutsche Bank lowered it rating to Hold from Buy.

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The Bottom Line

The traditional period of summer weakness in world equity markets appeared last week. Equity markets have a history of entering into a period of increased volatility at this time of year with a downward bias from mid-July to mid-October. Supplemental concerns this year include an earnings recession by major U.S. companies until the fourth quarter this year (particularly companies with extensive international operations), growing efforts by the Democrats to impeach Donald Trump, growing Middle East tensions and unsettled trade negotiations between the U.S. and China.

 

Observations

Medium term technical indicators for U.S. equity markets (e.g. Percent of stocks trading above their 50 day moving average, Bullish Percent Index) moved significantly lower last week and are trending down See charts near the end of this report

Medium term technical indicators in Canada also moved significantly lower last week. Percent of TSX stocks trading above their 50 day moving average are trending down.. See charts near the end of this report.

Most short term technical indicators for U.S. markets and sectors (20 day moving averages, short term momentum indicators) also moved lower last week

Short term technical indicators for Canadian markets and sectors also moved lower last week.

Frequency of quarterly U.S. reports drops again this week. Another 64 S&P 500 companies and one Dow Jones Industrial Average company are scheduled to release results. Frequency of quarterly reports by major Canadian companies also has passed its peak.

Forecasts for S&P 500 earnings and revenues into mid 2020 moved slightly lower again last week despite a modest increase in second quarter projections. According to FactSet, 77% of S&P 500 companies have reported second quarter results to date: Second quarter earnings are projected to drop 1.0% on a year-over-year basis (versus 2.6% last week) and second quarter revenues are expected to increase 4.1% (versus 4.0% last week). Third quarter earnings are expected to drop 2.2% (versus a drop of 1.9% last week) and revenues are expected to increase 3.1% (versus 3.2% last week). Fourth quarter earnings are expected to increase 4.5% (versus 4.9% last week) and fourth quarter revenues are expected to increase 4.0%. For all of 2019, earnings are expected to increase 1.9% and revenues are expected to increase 4.4%. First quarter 2020 earnings are expected to increase 9.0% (versus 9.2% last week) and revenues are expected to increase 5.7 % (versus 5.9% last week). Second quarter 2020 earnings are expected to increase 10.7% (versus 12.6% last week) and revenue are expected to increase 6.5% (versus 6.6% last week).

Strength in the U.S. Dollar Index from an average of 91.0 in the second quarter last year to above 98.0 last week continues to dampen earnings and sales projections for S&P 500 companies.

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Economic News This Week

Monday is a partial holiday in Canada.

July ISM Services Index to be released at 10:00 AM EDT on Monday is expected to increase to 58.3 from 58.2 in June.

Weekly Initial Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to be unchanged from last week at 215,000.

July Canadian Housing Starts to be released at 8:15 AM EDT on Friday are expected to drop to 200, 000 units from 245,700 units in June.

July Producer Price Index to be released at 8:30 AM EDT on Friday is expected to increase 0.2% versus an increase of 0.1% in June. Excluding food and energy, July Producer Price Index is expected to increase 0.2% versus a gain of 0.3% in June.

July Canadian Employment to be released at 8:30 AM EDT on Friday is expected to increase 12,500 versus a decline of 2,200 in June. July Unemployment Rate is expected to remain unchanged from June at 5.5%.

 

Earnings Reports This Week

 

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Trader’s Corner

 

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for August 2nd 2019

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Green: Increase from previous day

Red: Decrease from previous day

 

Commodities

Daily Seasonal/Technical Commodities Trends for August 2nd 2019

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Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for August 2nd 2019

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Green: Increase from previous day

Red: Decrease from previous day

 

Technical Scores

Calculated as follows:

Intermediate Uptrend based on at least 20 trading days: Score 2

          (Higher highs and higher lows)

Intermediate Neutral trend: Score 0

          (Not up or down)

Intermediate Downtrend: Score -2

          (Lower highs and lower lows)

 

Outperformance relative to the S&P 500 Index: Score: 2

Neutral Performance relative to the S&P 500 Index: 0

Underperformance relative to the S&P 500 Index: Score –2

Above 20 day moving average: Score 1

At 20 day moving average: Score: 0

Below 20 day moving average: –1

Up trending momentum indicators (Daily Stochastics, RSI and MACD): 1

Mixed momentum indicators: 0

Down trending momentum indicators: –1

Technical scores range from -6 to +6. Technical buy signals based on the above guidelines start when a security advances to at least 0.0, but preferably 2.0 or higher. Technical sell/short signals start when a security descends to 0, but preferably -2.0 or lower.

Long positions require maintaining a technical score of -2.0 or higher. Conversely, a short position requires maintaining a technical score of +2.0 or lower

 

Changes Last Week

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StockTwits released on Friday@EquityClock

Cisco $CSCO, a Dow Jones Industrial stock moved below $53.69 completing a double top pattern.

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South Korea iShares $EWY moved below $54.46 extending an intermediate downtrend.

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Invesco DB Base Metals ETN (equal weights in copper, zinc and aluminum) $DBB moved below $15.02 extending an intermediate downtrend.

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Metals iShares $XME responded to the drop in base metal prices by moving below $26.77

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Copper MIners ETF $COPX moved below $17.82 extending an intermediate downtrend

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Another base metals ETF breakdown! Global Metals iShares $PICK moved below $27.10 on declining base metals prices extending an intermediate downtrend.

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Dow Chemical $DOW, a Dow Jones Industrial stock moved below $46.75 to an all-time low extending an intermediate downtrend

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US Non-farm Payrolls fell by 0.7% (NSA), or 1.059 million, in July, stronger than the 0.9% decline that is average for the month. $MACRO #Economy #Employment #NFP

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Materials SPDRs $XLB moved below $57.27 completing a double top pattern

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Bank of Montreal $BMO.CA, a TSX 60 stock moved below $96.44 extending an intermediate downtrend.

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Imperial Oil $IMO.CA, a TSX 60 stock moved below $35.31 extending an intermediate downtrend

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United Kingdom iShares $EWU moved below $30.68 extending an intermediate downtrend.

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Oil Services ETF $OIH moved below $13.01 to a 16 year low extending an intermediate downtrend

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OpenText $OTEX $OTEX.CA, a TSX 60 stock moved below U.S.$40.67 and U.S. $38.81 following release of quarterly results setting an intermediate downtrend

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ManuLife Financial $MFC.CA, a TSX 60 stock moved below $22.52 completing a double top pattern.

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Hong Kong iShares $EWH moved below $24.05 completing a double top pattern

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S&P 500 Momentum Barometers

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Percent of S&P 500 stocks trading above their 50 day moving average dropped last week from 78.20 to 61.40. Percent remains intermediate overbought and trending down.

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Bullish Percent Index for S&P 500 stocks dropped last week from 72.40 to 61.40. The Index remains intermediate overbought and trending down.

 

TSX Momentum Barometers

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Percent of TSX stocks trading above their 50 day moving average dropped last week from 65.27 to 56.22. Percent has rolled over from overbought levels and is trending down.

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Disclaimer: Seasonality and technical ratings offered in this report and at

www.equityclock.com are for information only. They should not be considered as advice to purchase or to sell mentioned securities. Data offered in this report is believed to be accurate, but is not guaranteed

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6 Responses to “Tech Talk for Monday August 5th 2019”

  1. Ron/BC Says:

    The $SPX & the broad market are selling off sharply. Price has tagged its uptrendline from the December low and is closing in on its 200ema. Never takes long to fall out of bed does it. “IF” price doesn’t hold in between this uptrendline and the 200ema the next significant price support is the 2815 that price spent so much time dealing with both as resistance and as support. This is only August and the historical selloff time tends to be September well into October. Price action into October should tell us just what this market is made of.

    https://stockcharts.com/h-sc/ui?s=%24SPX&p=D&yr=1&mn=0&dy=0&id=p30240245806&a=673066103

  2. bruce Says:

    tnx Ron
    we re certainly oversold enough now for a short term bounce…..wonder what the Wizard will tweet to blame this decline….can hardly blame the Chinese for retaliating……..

  3. bruce Says:

    ron/ana

    I would think the u.s. mutual funds will be expecting redemptions tonight so they will be selling all day to free up cash depending on the phone calls they re getting to redeem……Ana i would be interested to hear your thoughts and targets…….

  4. Larry/ON Says:

    SP500 – Already into oversold RSI 28. Ugly market but this is when bargains come up for a short period of time. I would be surprised if the SP500 does not hold at 2800-2750. The May low was 2728.81 which would be the point that the market absolutely needs to hold.

  5. Ana Says:

    Hi bruce,

    Thinking something like this:

    This is the daily chart:
    https://invst.ly/bk7nh

    This is the weekly chart:
    https://invst.ly/bk7om

    I posted on July 19th:

    Ana Says:
    July 19th, 2019 at 11:49 am
    $SPX Futures

    Hanging by a thread!

    https://invst.ly/bc0ik

    Of course it took a few more days, sometimes you just have to wait these situations out.

    Thank you for your charts, Ron/BC!

  6. Ana Says:

    Might look at this too:

    This is the monthly chart:
    https://invst.ly/bkdl7

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